The CME Group FedWatch probability for a June rate hike spiked on the back of Federal Reserve Chair Janet Yellen said that a rate hike is "probably" appropriate in the near term, given an improvement in economic data.
"It's appropriate, and I've said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate," she said at an event at Harvard University.
Before the announcement, the market estimated a 28 percent chance of a June rate hike, but those odds now hover around 34 percent.
Traders tracked by the CME now see about a 64 percent chance of a July rate hike. They sat at a 57 percent chance before her speech.
Thirty-day fed funds futures prices are widely considered a reliable indicator of U.S. monetary policy changes. CME's FedWatch tool tracks the target rates based on fed funds futures contract prices.
A reading above 50 percent indicates the market's guess for the next rate hike.
— CNBC's Jacob Pramuk contributed to this report.